Expatriate Bangladeshi 2000

Linking Individuals, Regions, Ideas, and Actions

The Emerging Digital Economy: 

Implications for South Asia 

by Anil Srivastava, AcrossWorld Communications, Inc. 

anil@acrossworld.com

Courtesy of: Global Amitech (NFB)

BACKGROUND 

The quintessential prophesy of the communication guru Marshall McLuhan--Medium is the Message--is realized in Internet because the medium has created new possibilities and new messages which were not possible before. Mahatma Gandhi's vision of an ideal society was "ever widening, never ascending circles" (circa 1928). Internet is a network of networks which work together in an egalitarian manner.

Why do I juxtapose these two statements at the beginning of a paper on emerging digital economy. It is like an invocation of a faith and a belief that Internet, above all, will greatly influence the new millennium. Internet, as a philosophy, has the seeds of a new society for this troubled world of ours.

I am not going to talk of Internet technology. Technology is what all those wonderful nerds and geeks, like Marc Andreessen, do on a daily basis, continuing to push the envelop at a formidable pace, now being called Internet time, not years, not months, but weeks. Java, not the brew from Indonesia but the ubiquitous language of the microprocessor developed by Sun Microsystems, and the Jini connection technology based on Java, have opened up a whole new world of interdependent and networked global economy by providing the tools that will take the networks out to marketplace where people are.

Before Internet, it was possible to talk of transborder data flow, and isolation of economies (and people) behind iron or bamboo curtain, but no longer it is possible to stop the Palestinian schoolboy to converse over the Internet with the Israeli girl and ponder over the insanity. Or refuse to pay attention to the girl in Kosova, who is huddled in the dark, her minimum belongings wrapped up in a bundle, waiting for the knock that will tell her to leave her home and join the the millions of refugees looking for food, clothing and shelter. Yehudi Menuhin asked "When are all these new technologies finally going to let us hear from the voiceless millions of this earth?" and I hope someday soon these will not be stories to be told at seminars like these but the daily reality of our lives.

The push and the pull of Internet will, hopefully, create a new world where prosperity, and not poverty, will be the reality of daily life.

EMERGING DIGITAL ECONOMY 

"During the past few years, the United States economy has performed most expectations. A shrinking budget deficit, low interest rate, a stable macroeconomic environment, expanding international trade with fewer barriers, and effective private sector management are all credited with playing a role in this healthy economic performance.

Many observers believe advances in information technology (IT), driven by the growth of the Internet, have also contributed to creating this healthier-than-expected economy. United States Department of Commerce estimates IT Contribution to real economic growth to be as high as 41 percent in 1996." ( Emerging Digital Economy report, US Department of Commerce, April 1998. http://www.ecommerce.gov/emerging.htm).

According to the OECD Report, The Economic and Social Impact of Economic Commerce, "Electronic commerce has the potential to radically alter some economic activities and the surrounding social environment" and though at present "...electronic commerce over the Internet is relatively small (some $26 billion) but is growing very rapidly and may approach a trillion dollars by 2003-05." and almost 80 percent of it is/will be business-to-business transactions. (http://www.oecd.org/subject/e_commerce/summary.htm) 

UNDP's Info 21 website (http://www.undp.org/info21/e-com/e1.html), which focuses on approaches, strategies and success stories for entrepreneurs in developing countries, has this report: "E-commerce is gradually also permeating economies of developing countries. An Internet connection set up in a Peruvian village helped the community establish a partnership with a company in New York and expand the market for their agricultural products. It resulted in a 5-time increase of income, from US$300 to US$1500 a month. Internet connectivity thus can provide an unparalleled opportunity to people in remote rural areas to expand their business activities beyond local confines to a a global reach." According to UNDP "...it is almost imperative for SMEs in developing countries to have access to computer hardware and software and to Internet connectivity."

Closer home in South Asia, The KPMG India Electronic Commerce Survey Report, 1998, states that "The popular view of e-commerce is that the hype is not backed up by profitable activity on the operational level. The results contained in this research report indicate that this state of affairs is changing with a number of companies trading through electronic channels with plans of integrating them with their supply chains." and electronic commerce is very important to their business strategy as "...nearly half the organizations surveyed gave importance to e-commerce as a part of their business strategy. Only 4 per cent said that it was of no importance to their business strategy." (http://www.india-today.com/btoday/06031999/kpmg.html)

According to Singapore Business Times quoting an IDC estimates of electronic commerce for some other countries in Asia are:

Singapore: US $800 million Malaysia: US $1 billion Thailand: US $200 million Indonesia and the Philippines: expected to generate just short of US $200 million

My own company, AcrossWorld Communications, Inc., is predicated on the belief that there is a synergy between the emerging market countries and industrialized nations and that this synergy is electronic commerce. We believe that trade and commerce will drive the growth and penetration of Internet which in turn will become the basis for better governance, learning and communication between people. Based on this conviction we are investing into creation of a robust network in South Asia with a thick pipe connecting the network to the Internet backbone.

BORROWED WISDOM 

Talking of the Rich-Poor Gap, MIT's Michael Dertouzos, in his book "What Will Be How the New World of Information Will Change Our Lives" (ISBN 0-06-251479-2) has this to say:

--Left to its own devices, the Information Marketplace will increase the gap between rich and poor countries and between rich and poor people

--The broad leverage of information that makes it so attractive to wealthy nations and wealthy people is also what makes it so devastating in its absence for the poor.

Net Gain: Expanding Markets through Virtual Communities by John Hagel III and Arthur G. Armstrong (ISBN: 0-87584-759-6) has become the mantra of electronic commerce. According Hagel and Armstrong:

--Success in the virtual community business hinges not on technology driven differentiation but on strategies designed to accelerate member acquisition and to create deep understanding of the needs of those members.

--A Level Playing Field for Small Companies? To the extent that a smaller company offers a better product or better customer service, it will have a better chance of promoting these strengths in a virtual community than in the off-line world. Mostly entrepreneurial, rarely capital intensive, they may be a partial antidote for the layoffs of the 1980s and 1990s. Many of the things that companies used to be able to rely on for competitive advantage are going to erode in this new environment.

--Radical Management Implications of Virtual Communities. Virtual communities will further strengthen companies that demonstrate excellence in management.

--Assets Aren't Enough. By systematizing word of mouth, communities will tend to reward companies that give their customers excellent value. By making markets more efficient, they will reward companies able to manage their cost structure effectively when market prices come under pressure. Size and brand are going to be worth a lot less. Size becomes less important because less investment is required to create the distribution capability needed to reach your target customers. Brand becomes less important because information is more readily accessible on individual products. You no longer have to rely on brand as a guarantee of quality and value.

--New Roles for New Organizations. If successful, virtual communities will spawn new industries: community organizing, bulletin board moderating, software design, and community architecture, among others. But the most radical potential impact of the virtual community may well be its impact on the way individuals manage their lives and companies manage themselves. Communities will serve to connect, much like the postal system and telephone before them. But they will go several steps further than the telephone or fax, as they help the individual seek out and find souls in search of relationships, colleagues in search of teamwork, customers in search of products, suppliers in search of markets: the virtual community might have a place for them all.

We are talking of Internet time, and The Race Belongs to the Swift. Can South Asia wait?

I don't think so. As the governments of South Asia gradually drop the barriers to foreign trade and increasingly seek to participate in the global marketplace, they must proactively encourage the growth of Internet within their countries, and in the region, and make it an instrument of their trade policy.

REGIONAL COOPERATION 

South Asian Regional Cooperation for Internet is necessary because their combined resources, and shared gateways, will allow for more traffic to flow to the region and from the region. The electronic commerce within the region will help develop the skills, expertise, essential institutions (banking, arbitrage, logistics) and unique solutions that will allow merchants of South Asia to access the world market for their goods and services.

Commercial Internet, if I can use the term, will create and afford the infrastructure that will make it possible for societal benefits to flow to the people. The time for subsidized networks is over. World Bank's slogan de jure is "A World Free of Poverty". Let me suggest to my friend, Robert Schware, who knows the region well, to consider a study funded by The World Bank on opportunities for trade and commerce for countries of South Asia provided by electronic commerce and ways and means these opportunities could be accessed. I expect this to be a study funded by The World Bank Trust Fund, not infoDev, as was the software opportunity study for India which is a very good model in terms of wide consultation it generated and several independent actions it promoted.

The persons who could be members of the steering committee to direct this study are seated in this room. They represent the early adapters and drivers of Internet. Add to them the representatives of the more dynamic and far thinking of chambers of commerce of each country. Let the representatives of the governments--bureaucrats, facilitators and legislators whose job is to make sure that the prosperity of the region in the new dawn of Internet economy is not hampered by shortsightedness--rightfully take the ringside seat as observers.

Ask OECD, US Department of Commerce, Japan, and UNDP to support the study by an intense parallel stream of study tours. Short in duration, intensive in nature, and a well prepared host institution to receive selected cross section South Asian participants who will be charged with the responsibility to prepare an electronic commerce scenario for their situation (product, company, industry) and argue its viability.

Rob Schware has to find a way to involve the non-profit, CommerceNet, includes "...over 500 corporate members worldwide, providing a global perspective on electronic commerce that is unparalleled in the industry.", into the fold and draw its support for the study tours, specially in the selection of host institutions across the world, but all the way to compiling a compiling a manual of best practices. It is important to create a mechanism whereby South Asian participants could collectively gain membership benefits in CommerceNet and benefit from participation in its activities as well as propose and take part in pilot projects involving companies in South Asia and industrilized nations. (http://www.commerce.net).

At the same time create a South Asia Internet Initiative, a virtual community on the web, where all these ideas intersect with other ideas, interests, institutions and initiatives that we do not as yet know but are out there. From this triangulation will emerge the relationships to sustain future work. Over the next twelve months, we want to elicit input and guidance from all our partners, from our critics and from skeptics on the concept and on its operational feasibility.

Last, but not the least, ask IFC to step up to the plate and concurrently, in partnership with global players, create a South Asia Internet Venture Fund (SAIVF) which will invest into private Internet companies with the knowledge and expertise that is available for Internet investments elsewhere. For this a great acumen is needed to assemble the venture partners and source of investment that is not ordinarily available, for example, there are three groups that could provide the needed funds:

One, the strategic investments from network equipment manufacturers who will greatly benefit from the expansion of the market.

Two, the global businesses who will directly benefit from integrating their South Asian offices and facilities in their global enterprise management and supply chain systems. In India alone, 200 of Fortune 500 companies have established operation.

Three, individual small investments by millions of people of South Asian origin living and working in the West who have benefited from the Internet economy, and would happily contribute to development of Internet in their home countries which will allow them to keep in touch with their friends and families back home as they are used to in their adopted countries. Ask the veteran, Charlie Kokesh, who has built a billion dollar Technology Funding VC-6 fund with individual investors joining with small investment by credit cards on the Internet  (http://www.techfunding.com/).

It is not IFC money but its ability to invest effort to create such a facility, its financial credibility and knowledge of the market, and the credibility of The World bank group in international finance market. Above all IFC, together with MIGA, will have to put in the structure which will make this investment possible.

According to infoDev, "Modern information infrastructure can create the "end of geography" and allow isolated countries and regions, which often are also the poorest, to participate in the economic process." and "The time is ripe for development assistance institutions and private organizations to form a partnership to further help emerging economies benefit from the rapidly expanding information revolution."  (http://www.worldbank.org/infodev/about/backgro2.htm)

As an Indian, I would love to see some of the participants from this SASIANET workshop come together again at international conference in the June-July 1999 timeframe to report on the results of the GIIC E-Commerce Project (http://www.gii.org/#india) in India. The project will consist of a survey of electronic commerce in India; a review of laws and regulations governing electronic commerce; and a White Paper to be submitted to the government. The conference expects representatives from international organizations, including the World Bank, the WTO, the ITU, APEC and the OECD. (http://www.gii.org/focus/). Global Information Infrastructure Commission is a project of Center for Strategic & International Studies. The GIIC In India E-Commerce, is partially funded by infoDev, and jointly supported by GIIC Commissioner Ravi Parthasarathy of Infrastructure Leasing and Financial Services (IL&FS), and Dilip Chenoy of the Confederation of Indian Industry (CII).

END OR THE BEGINING 

The experience has shown that the market for Internet service providers is a chart buster. So don't be afraid of the competition. Every new competitor adds to the quality and reach of the Internet and creates a new opportunity. Don't covet the investment: help enlarge the opportunity and share it with your competitor. If there is not one, go out and find someone who could compete with you. Monopoly is a lonely place and Internet is about connecting and competing with better connection.

I know this could be done. I know the people who could make this possible. I know that my company will benefit from the growth of Internet in South Asia, therefore, I am willing to step up to the plate and offer to create and host the South Asia Internet Initiative website and invest time, energy and resources to make it the beacon for all other more substantial 'freighters' described above.

Having began my piece, with a quotation from Gandhi and McLuhan, it is only appropriate to end with the words of Thabo Mbeki, Deputy President of South Africa:

"because we are a people-centered society, the Information Age should focus on empowering people; people should seize the new technologies to keep informed about the truth of their own economic, political and cultural circumstances, and that of the others throughout the world"

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